On January 1, 2017, MOOSE inc issues a 5 year 8,000,000 par value 8% coupon rate,...

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On January 1, 2017, MOOSE inc issues a 5 year 8,000,000 par value 8% coupon rate,...

On January 1, 2017, MOOSE inc issues a 5 year 8,000,000 par value 8% coupon rate, compounded semi annually. The market initially prices these bonds at 6% effective rate.

Record journal entry on these interest expense on June 30, 2017 and December 31, 2017.

Record journal entry on Dec 31,2021 (both interest and redemption).

business accounting

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Answer 1

Answer #1

In the Present question :-

Principal

$8,000,000.00

Coupon rate

4.00%

(8/2)

Period

10

Yeild Rate

3.00%

(6/2)

Yearly Interest

$320,000.00

(2000000*12%)

Payment and Discounting Chart is as follows:-

1

0.97087

$320,000.00

$310,678.40

2

0.94260

$320,000.00

$301,632.00

3

0.91514

$320,000.00

$292,844.80

4

0.88849

$320,000.00

$284,316.80

5

0.86261

$320,000.00

$276,035.20

6

0.83748

$320,000.00

$267,993.60

7

0.81309

$320,000.00

$260,188.80

8

0.78941

$320,000.00

$252,611.20

9

0.76642

$320,000.00

$245,254.40

10

0.74409

$8,320,000.00

$6,190,828.80

TOTAL

$8,682,384.00

Bond Ammortization Schedule would be

A

B

C

D

E

F

G

Interest Pmt.

Interest

Premium

Credit Bal.

Carrying Amount

Cash Paid

Expense

Ammortization

in the account

of Bonds

4% * Face

5 % * G

C minus B

Bond Premium

Bonds Payable

F Minus E

1-Jan-17

$0.00

-$682,384.00

$8,000,000.00

$8,682,384.00

30-Jun-17

$320,000.00

$260,471.52

-$59,528.48

-$622,855.52

$8,000,000.00

$8,622,855.52

31-Dec-17

$320,000.00

$258,685.67

-$61,314.33

-$561,541.19

$8,000,000.00

$8,561,541.19

30-Jun-18

$320,000.00

$256,846.24

-$63,153.76

-$498,387.42

$8,000,000.00

$8,498,387.42

31-Dec-18

$320,000.00

$254,951.62

-$65,048.38

-$433,339.04

$8,000,000.00

$8,433,339.04

30-Jun-19

$320,000.00

$253,000.17

-$66,999.83

-$366,339.22

$8,000,000.00

$8,366,339.22

31-Dec-19

$320,000.00

$250,990.18

-$69,009.82

-$297,329.39

$8,000,000.00

$8,297,329.39

30-Jun-20

$320,000.00

$248,919.88

-$71,080.12

-$226,249.27

$8,000,000.00

$8,226,249.27

31-Dec-20

$320,000.00

$246,787.48

-$73,212.52

-$153,036.75

$8,000,000.00

$8,153,036.75

30-Jun-21

$320,000.00

$244,591.10

-$75,408.90

-$77,627.85

$8,000,000.00

$8,077,627.85

31-Dec-21

$320,000.00

$242,372.15

-$77,627.85

$0.00

$8,000,000.00

$8,000,000.00

I have prepared for the full bond period, You can type accordingly as per the need.

Date

Account Titles & Explanation

Debit

Credit

30-Jun-17

Interest expense on Bonds

$260,471.52

Premium on Bond Ammortization

$59,528.48

Cash/Bank

$320,000.00

(Interest Accrued and Premium on

Bond Ammortized)

31-Dec-17

Interest expense on Bonds

$258,685.67

Premium on Bond Ammortization

$61,314.33

Cash/Bank

$320,000.00

(Interest Accrued and Premium on

Bond Ammortized)

31-Dec-21

Interest expense on Bonds

$242,372.15

Premium on Bond Ammortization

$77,627.85

Cash/Bank

$320,000.00

(Interest Accrued and Premium on

Bond Ammortized)

31-Dec-21

Bonds Payable

$8,000,000.00

Cash/Bank

$8,000,000.00

(Bonds retired)

Thanks & regards

Hoping for a Positive Response

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Answer 2

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